governance, political economy, institutional development and economic regulation

Posts tagged ‘Jean Dreze’

Growth with jobs is the new Eldorado. At its core, the raging debate around job creation in India is really about how far India has traveled down the conventional path of industrialized development and its proxy — long-term employment, with defined benefits and social security. This metric of economic performance is anachronistic in the post-industrial ecosystem.

Long term, formal employment is declining even in the developed economies. The future of work is casual, possibly off-site, with skill sets and job descriptions that are constantly adapting to technology and re-schooling a necessity even for the middle aged. We may never ever reach the copybook stage of industrial age employment. India, unlike China, is largely informal and ineffectively regulated for work standards and safeguards. Out of a workforce of around 427 million, formal employment is just 14 per cent at 60 million.

Mind you, there are 972 million people more than 15 years of age who could work. But the lack of opportunity in the workplace and cultural constraints keep 56 per cent of then (a vast majority of them being women) at home. This probably explains our penchant to get to a higher level of formalized employment, say 60 per cent of the workforce, and thereby resemble a developed economy.

Statistical jousts around employment

The ongoing statistical debate between government economists (of the Niti Aayog and those in the Prime Minister’s Economic Advisory Council) and external experts (from CMIE, for example) revolves around the number of jobs created since 2014 as an index of economic performance. The CMIE data, based on quarterly surveys, shows that net-job creation in 2017, over the previous year, was just 1.4 million, primarily due to large job losses of seven million among young adults (aged 15-24) and three million among veterans (aged 65 or above) significantly diluted the positive impact of an addition of 12 million jobs in the age group of 25 to 64.

The government appears disinclined to trust large surveys. It prefers to rely on the monthly payroll data. There is the inexplicable issue of just 12 per cent of women, of 15 years and above, being part of the workforce in the CMIE survey data. Gallingly, 21 per cent of Saudi Arabian women work. Can it be that 88 per cent of Indian women above 15 years actually do not wish to work? Compared to such quirks in the CMIE survey data, there is a comfortable certainty about the payroll data. The only problem is — payroll data is unlikely to provide the granularity required across a largely informal economy.

Even if one is disinclined to believe the outlier estimation by economist Surjit Bhalla, of an addition of 15 million jobs in 2017, the good news is that data from the Employees Provident Fund Organisation (EPFO) shows an addition of three million jobs during the six months till February 2018 — an encouraging growth of 10 per cent per annum over the 60 million employee accounts. It is unclear, however, if these are all new jobs. The digital outreach, increased tax oversight and the GST implementation are all encouraging formalisation of operations, including payments to existing informal workers. Payroll data from the New Pension Scheme for government employees shows a similar happy trend, with an addition of 0.4 million employees to the base of around 5 million employee accounts.

It remains unclear where this statistical jousting is leading to, except to the scoring of political brownie points with the relevant political constituencies.

Workers under threat – too many, chasing too few jobs

For the large mass of workers, a “formal” sector “good” job in the classic industrial sense of the term is becoming increasingly unlikely. Humans are under threat. Karl Marx was on the button, two centuries ago, when he intuited that it is humans who add value in the economy. We still do. But we became so good at extracting value from human effort that we have marginalized ourselves. Machines today, substitute for all but the most advanced cognitive human skills. Once machine learning becomes deeper and autonomous of human effort, technology czars like Ellon Musk, presciently point to a dystopic, machine versus man future for the planet.

We do not have to imagine what it will be like in in 2050. Even today, deepening levels of worker anxiety about retaining a job affects large swathes of the developed economies. Indians and others in the developing world are already well acquainted with this syndrome. We hesitate to take medical leave even when we are sick. And if you think that happens only in the informal sector, think again. Even politicians and senior government officials fear being nudged out, merely by not being visible.

Low levels of formal employment require enhanced government intervention. As work becomes intermittent or irregular, even for skilled employees, the potential loss of income must be cushioned by social protection schemes to keep individuals and families afloat.

Listen to the Jholawallahs

The NREGA program is a basic form of such cushioning, which benefits around 20 million manual workers. Jean Dreze is right when he asserts that access to work is more than just another way of putting public money into needy private hands. Aruna Roy has the same message. Collectives have a dynamic, which empowers the marginalised. They provide institutionalized support for challenging traditional, arbitrary and often illegal entitlements. They also establish a new and healthy tradition of direct democracy.

The early noughties presented a future which looked impossibly bright and full of possibilities, girded by shining bands of opportunity crisscrossing the globe. That vision has now dimmed. The environmental, cultural and institutional limits of globalization are now visible. We would do well, however, not to be blindsided by the inevitable ratcheting down of global aspirations. It could turn out to be a hard landing for the overly ambitious.

Adapted from the author’s opinion piece in The Asian Age, May 5, 2018 http://www.asianage.com/opinion/columnists/050518/jobs-nature-of-work-it-may-be-time-to-rethink-basics.html

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Elite concerns are usually disconnected from the ground reality. For the 1 per cent of Indian who live privileged, cocooned lives, the judicial right to privacy created by the Supreme Court yesterday will add yet another layer with which they can insulate themselves from the “barbarians at the gate”. So, here is what the rich may now be able to do which they couldn’t earlier.

Is the right to euthanasia next?

First, they may now be able to refuse medical treatment and die in their beds, peacefully, instead of being compulsorily hooked up to tiresome, life-saving machines in hospitals. But try explaining this “right” to the millions of poor Indians for whom just getting admitted to hospitals is still a dream and refusing treatment would be unimaginable.

Deletable past lives

Second, the well-heeled may now be able to press for being judicially forgotten – all traces of their past lives and identities expunged, giving them a fresh start without having to flee to distant London or arid Dubai. Contrast this with the Herculean efforts the average Indian makes to become part of a database and have an officially recognized identity – a voter card, a passport, a PAN card, anything which proves that she exists.

LGBT sex may become legitimate

Third, those with alternative lifestyles – the Lesbian, Gay, Bisexual Transgender (LGBT) community might now hope to be free of the notoriously archaic Section 377 of the Indian Penal Code, which criminalizes everything other than straight sex. But would this give them the right to marry a partner of their choice; adopt children or be socially accepted?

Evidencing crime will become harder

Now ponder the downsides. Law enforcement agencies struggle to manage terrorism, Naxalism, urban mafiosi, drug pushers and armed rural gangsters even today. “Privacy” concerns will provide a legal shield to undermine information collection, crime detection and investigation. Nothing less than the over-the-top, draconian Armed Forces (Special Provisions) Act – used today only in the “disturbed” areas in Kashmir and parts of the North East – would be effective. Since gangsters can afford to hire the best lawyers, the violation of their fundamental right to privacy in the process of enforcing the law, will now become a favourite ploy to keep these worthies free to wreak havoc.

How intrusive is the Indian State anyway?

Will this fundamental to privacy help the 200 million slum dwellers or the unknown millions who sleep under the stars on urban streets? Is not our fear of the “big State” overblown? The India I know is under policed, under governed and under regulated. There is a plethora of agencies, laws and rules to bind down anyone and yet very few – mostly the timid, those mindful of their public image and the law respecting middle class get intimidated by the legal spaghetti. The rich buy their way out of any mess and the poor are so inured to danger and risk that it is second nature for them to live with uncertainty.

Biometric targeting of beneficiaries to be abandoned?

Take the case of Adhaar for verifying the identity of those using the Public Distribution System (PDS). Recent studies in Jharkhand by responsible social scientists – Jean Dreze and Reetika Khera – found that 15 percent of the eligible PDS beneficiaries were excluded because of technical glitches or access problems in using Aadhar as a test of identity. But 85 percent of the beneficiaries were targeted correctly. If the right to privacy eliminates the use of Adhaar, we will be back to what Rajiv Gandhi famously called the 25 percent approach to poverty reduction – where 75 percent of the funds are siphoned-off by intermediaries. How and why would a reversion to a system which has huge inclusion errors (ineligible people getting benefited) be any better?

Big data to be throttled?

Finally, consider how retrograde is the fight by “right to privacy” advocates against big data. It is big data – the billions of pieces of information on human behavior and preferences linked to specific human demographics, which enables algorithms to predict trends, thereby aligning products and services with customer needs. This is what makes big data commercially valuable. In price sensitive markets like India, telecom and e-commerce penetration is being driven by the potential to monetize big data. Putting brakes on this process means putting brakes on the rolling out of technology services which will become more expensive if the actual user is to pay for them.

India lost an opportunity in 2014 when facebook- Bharti Airtel wanted to roll out free internet services on mobiles. TRAI regulations ensured that this venture never took off, thereby slowing down internet access for all except the 300 million people in the upper most income segments who can afford it.

Tilting at windmills

Nandan Nilekani is now an evangelist against “digital colonialism” in the context of tech majors like Google and Amazon aggressively expanding their presence in India. We should be wary of tech industry insiders playing the “anti-foreign” card. Similar attempts were made by the infamous “Bombay Club” to scuttle the 1992 economic liberalization. Their contention was that liberalizing the domestic market was fine but Indian industry should continue to be protected from foreign competition. We are fortunate that the government of the day paid no heed to this self-serving agenda.

Keep India open for competition

India is a big economy with very shallow industrialization. We need to remain open to all economic actors – domestic and foreign who want to invest in India. It would be a huge mistake to emulate the xenophobia of the United States and draw up our bridges. Data is the new oil. Data security needs to be ensured, irrespective of whether data is stored in India, or overseas. But generating anti-foreign hysteria is not in our interest as we try to integrate into global supply chains and become a part of the global value creation eco-system.

It is easy enough to legislate rights. We have many notional rights. Creating a level playing field for all citizens to enjoy these rights, equally, is another matter altogether.

Irrespective of its economic virtues, demonetisation — an aggressive, unprecedented initiative of Prime Minister Narendra Modi, brought rich dividends for the BJP in the Uttar Pradesh election. Above all, voters were impressed with his determination to punish those who have become fat on black money. That the move also “punished” those who had no black money — via extended inconvenience, loss of business or employment — was collateral damage.

An incredible 41 per cent of voters gave a thumping majority to the BJP, including possibly those who were collateral fodder or the target — proving, yet again, that in politics, good intentions trump technically appropriate action.

The next frontier

So what can the Prime Minister do next to shock and awe the Opposition and win minds and hearts across India? Elections loom in Karnataka in 2018, currently ruled by the Congress, and national general election is in 2019. The chosen programme must be elegant not clunky; effective not merely palliative; quickly deliverable and fiscally prudent.

The Union government currently uses clunky, partially- or fully-funded schemes, implemented by the state governments, to establish its human face. There were 1,500 such schemes, which the Modi government has pruned to around 657. Most are massively inefficient. Arvind Virmani, a former chief economic adviser, claims they follow the one-third rule. Only one-third for the targeted beneficiary, one-third for administrative expenditure and one-third for corruption.

Mind you, it is expensive to provide access to public services and goods even via a cash support mechanism. Prof. Abhijit Banerjee of MIT assesses the average administrative cost, across countries, of cash support programmes at 50 per cent of the amount delivered.

A universal, unconditional income transfer in cash to all citizens is the most efficient option. But it suffers from bad optics. The same amount of money is given to a beggar as to a real estate baron. But Sudipto Mundle of NIPFP argues that select exclusions are possible without massively retarding efficiency. The most obvious exclusion is anyone in urban areas. The average income in urban areas is consistently higher than in rural areas, where 80 per cent of the poor live.

Substitution or additional support

Others, like Jean Drèze, are sceptical about the cash transfers, specially for food support. We know food prices spike during drought. During such extreme events, the transferred income would be insufficient to buy the targeted amount of food. Those living at the edge cannot afford to be caught in such a situation.

Clearly, basic income transfer is not a substitute for all other existing social support mechanisms in education, health and social protection, but it can substitute those mechanisms which are the most wasteful and poorly targeted.

Reform wasteful, leaky de-merit schemes

The Economic Survey 2017, lead-authored by Arvind Subramanian, chief economic adviser, does signal service by evidencing the problem of misallocation of fiscal resources in the existing schemes. The share of the districts, where 40 per cent of the nation’s poor live, in allocation for anti-poverty schemes, like the mid-day meal scheme is just 20 per cent and just 24 per cent in the Swachh Bharat Mission. Such misallocation is wasteful.

SEWA pilot shows the way in MP

A pilot done by SEWA in four villages in Madhya Pradesh, over a period of two years, covering 6,000 people along the universal coverage principle, transferred Rs 3,600 per year to each adult, with lower amounts to children. The results are impressive. The most significant outcome is that even four years later, many of the initial achievements with respect to the enhanced decision-making role of women; sustainable income from assets — mainly livestock — and the continued productive use of income remained strongly in place. Similar pilots are being done in Africa. But the caveat is that pilots involve significant handholding and oversight without which, as in Ghana, sustainable income enhancement is negligible. This cautions that even with a universal basic income scheme the role of handholding will remain.

A first for India

India could become the first country in the world to use a “qualified-universal” basic income transfer to end poverty. The real problem is how to find the money. Arvind Panagariya, the Prime Minister’s key economic adviser and vice-chairperson of the Niti Aayog, however, highlights the fiscal requirement. At just Rs 10,000 per year per person the cost is equivalent to the government’s entire revenue of 10 per cent of GDP.

Use second best options – sequential implementation; finance the poverty gap

But there are viable second-best options. First, smaller amounts could be transferred. The poverty gap has been estimated at around Rs 3,500 per poor person per year as in the SEWA pilot. The Economic Survey records that an annual transfer of Rs 3,240 to every female would cost one per cent of GDP. The cost can be reduced further by a quasi-universal scheme focused on females only in rural areas, with girl children getting less and women getting more, as in the SEWA pilot.

Subsidy reform is overdue. The Prime Minister had also adopted the approach of “subsidy tyaag” the voluntary giving up of subsidy by those who were well-off. It is also possible to make it administratively more difficult to access demerit subsidies like on cooking gas; fertiliser and income-tax exemptions with the target of eliminating them altogether.

In the meantime, a “quasi-universal” basic income transfer scheme can be started by allocating just Rs 75,000 crores (just 0.3 per cent of anticipated GDP in 2017-18) to one-third of the poorest districts. The programme can be expanded to other districts by allocating just two-fifths of the incremental revenues, especially if growth trends upwards beyond eight per cent per year.

PM should grasp the moment

Prime Minister Modi is not one to be hesitant about funding innovative ideas in the public interest. The quasi-universal basic income scheme is one door that he should consider walking through, specially if he is confident that India shall grow at above eight per cent.

Adapted from the author’s article in the Asian Age, March 31, 2017 http://www.asianage.com/opinion/columnists/310317/basic-income-transfer-modis-next-big-thing.html